Rentals dominate south county's real estate market

This home on Hudson Street near Eight Mile Road and Van Dyke in Warren is situated in a neighborhood that has been inundated with rental homes after investors bought inexpensive homes during the housing crisis.

There’s a long line of closely-situated homes on Hudson Street near Van Dyke and Eight Mile Road, and it’s safe to say some of the single-family homes are in better condition than others.

Of about 70 homes on the street, which is tucked behind an industrial area and is within walking distance of Lincoln Elementary School, a handful of well-kept homes are adjacent to structures that have some signs of disrepair. But others are afflicted with more obvious signs of neglect; boarded-up windows, and missing siding are those that are visible from the street.

Signs that indicate an inspection will be required before homes can be occupied are affixed to several structures, and others are up for sale. A three-bedroom ranch built in 1951 is listed for $9,900. Down the street, a two-bedroom home built in 1940 that sold for $50,000 in 2010, according to an online listing service, is priced at $9,000.

James McDannel, who has lived on the 11000 block of Hudson for a decade, said the low cost of real estate has brought in a flood of investors that purchased cheap, foreclosed properties in huge numbers at bargain basement prices during the recession. The owners, he said, care little about whether the homes are safe or habitable for renters.

Advertisement

“There have always been rental properties on this street,” he said. “But I would say that about 65 percent of the homes here are rentals, and it used to be about 25 percent.

“The landlords make minimal repairs to a property so they can pass an inspection – if they have not found a way to circumvent the city inspection altogether, McDannel said. “They don’t care – and I don’t know if this neighborhood can come back because of this.”

Real estate sales have been brisk on Macomb County’s south side largely because of investor interest, but some residents – and many in the halls of government – believe the spike in the number of rental properties is destabilizing Macomb’s oldest suburbs. This has led to municipal governments enacting aggressive ordinances designed to track properties and ensure landlords comply with local codes.

But often, property owners don’t live in the communities where their rentals are located. Further, renters some – but by no means all – renters have little incentive to maintain properties.

Steve Duchane, the city manager of Eastpointe, said the number of rentals in the city has increased over the last year, and that city officials and residents are coping as best as they can with the influx.

“There’s no doubt that we’ve seen an increase in rentals,” he said. “But we have a program in place that I think is working to make sure the homes are up to code. (Landlords) have the right to buy investment properties. But the need to maintain community standards.”

Big increases, temporary residents

Most municipal government concerned with the proliferation of rentals enacted ordinances that require landlords to register properties at city hall. Under these programs, landlords are required to submit to property inspections, typically at one- or two-year intervals and pay a fee. This, officials said, allows inspectors to enforce codes and ensure properties are safe for human habitation.

Additionally, the fees paid by landlords pay for costs associated with inspectors.

In Eastpointe, the number of rental properties increased to 3,100 properties from about 2,100 properties two years ago, said Duchane. That number represents about 26 percent of the city’s 12,000 homes.

In Warren, rental properties have inched up to 6,500 single-family units out of 50,000 homes citywide, said Richard Sabaugh, the city’s director of public service.

“Most of those are between Eight and 10 Mile roads,” he said. “And the highest concentration of rentals in the city is between Eight and Nine (Mile roads), near Van Dyke.”

Sabaugh said that as the foreclosure crisis took hold in Michigan that the southern part of the city was ripe for investor activity because prices home prices were extremely low.

“Of course we want more homeowners,” he said. “At least we do have a program in place – and I think it’s one of the best in Michigan – that allows us to address properties that are deteriorating through the inspection process.”

But the fact of the matter is that in all communities, under-the-radar rentals that are not registered exist. That means the number of rentals in smaller, poorer communities might be much larger than city officials know.

“We have a $1,000 fine if we find out that a person didn’t register,” he said. “We also take tips from the community; we really encourage that.”

Landlords have been able to circumvent the registry in a number of ways, including advertising the property without including the address on websites like Craigslist.

Encouraging homeownership, landlord rights

In St. Clair Shores, the number of rentals is also increasing, but City Manager Phil Ludos said the fact that the city purchased properties that tax-reverted to Macomb County to rehabilitate and sell in 2012 is keeping numbers from spiraling out of control.

“We opened up an RFP for realtors in the community to get the listings, and I’ve signed four closings over the last 12 days or so,” he said.

The city of Warren is also preparing to introduce a home ownership initiative sometime during the next several weeks, said Sabaugh.

Clay Powell, the director of the Rental Property Owners of Michigan, is concerned that landlord’s rights are being violated by municipal registry programs.

“The general feeling among my members is that they’re all over the place regarding the fees,” he said. “In some places, landlords ate much larger costs, and those costs are not reflective of what it really costs to administer these programs. There’s also a real concern about the intrusion on the frequency of inspections – that can be a real intrusion on a renter’s life.”

Back on Hudson Street in Warren, James McDannel wonders if he’ll ever see his neighborhood improve.

“Homes on the south end of the city are being bought up by investors and they’re just not taking care of them,” he said. “It’s a bad situation.”